Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

T
Yes
o
No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

T
Yes
o
No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

On May 21, 2013, the Board of Directors of JPMorgan Chase increased the Firm’s quarterly stock dividend from $0.30 to $0.38 per share.

(b)

Tangible book value per share and ROTCE are non-GAAP financial measures. Tangible book value per share represents the Firm’s tangible common equity divided by period-end common shares. ROTCE measures the Firm’s annualized earnings as a percentage of tangible common equity. For further discussion of these measures, see Explanation and Reconciliation of the Firm’s Use of Non-GAAP Financial Measures on pages
15–16
of this Form 10-Q.

(c)

Share price shown for JPMorgan Chase’s common stock is from the New York Stock Exchange. JPMorgan Chase’s common stock is also listed and traded on the London Stock Exchange and the Tokyo Stock Exchange.

(d)

Return on Basel I risk-weighted assets is the annualized earnings of the Firm divided by its average risk-weighted assets (
“
RWA
”
).

(e)

Basel 2.5 rules became effective for the Firm on January 1, 2013. The implementation of these rules in the first quarter of 2013 resulted in an increase of approximately $150 billion in risk-weighted assets compared with the Basel I rules. The implementation of these rules also resulted in decreases of the Firm’s Tier 1 capital, Total capital and Tier 1 common capital ratios by 140 basis points, 160 basis points and 120 basis points, respectively, at March 31, 2013. For further discussion of Basel 2.5, see Regulatory capital on pages
60–63
of this Form 10-Q.

(f)

Basel I Tier 1 common capital ratio (“Tier 1 common ratio”) is Tier 1 common capital (“Tier 1 common”) divided by risk-weighted assets. The Firm uses Tier 1 common capital along with the other capital measures to assess and monitor its capital position. For further discussion of the Tier 1 common ratio, see Regulatory capital on pages
60–63
of this Form 10-Q.

(g)

Effective January 1, 2013, interns are excluded from the firmwide and business segment headcount metrics. Prior periods were revised to conform with this presentation.

(h)

Excludes the impact of residential real estate purchased credit-impaired (“PCI”) loans. For further discussion, see Allowance for credit losses on pages
92–94
of this Form 10-Q.

3

INTRODUCTION

This section of the Form 10-Q provides management’s discussion and analysis (“MD&A”) of the financial condition and results of operations of JPMorgan Chase & Co. (“JPMorgan Chase” or the “Firm”). See the Glossary of terms on pages
212–214
for definitions of terms used throughout this Form 10-Q.

The MD&A included in this Form 10-Q contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. For a discussion of those risks and uncertainties and the factors that could cause JPMorgan Chase’s actual results to differ materially from those risks and uncertainties, see Forward-looking Statements on page
107
and Part II, Item 1A: Risk Factors, on page
218
of this Form 10-Q; and Part I, Item 1A, Risk Factors, on pages 8–21 of JPMorgan Chase’s Annual Report on Form 10-K for the year ended December 31, 2012, filed with the U.S. Securities and Exchange Commission (“2012 Annual Report” or “2012 Form 10-K”), to which reference is hereby made.

JPMorgan Chase & Co.
, a financial holding company incorporated under Delaware law in 1968, is a leading global financial services firm and one of the largest banking institutions in the United States of America (“U.S.”), with operations worldwide. The Firm had
$2.4 trillion
in assets and
$209.2 billion
in stockholders’ equity as of June 30, 2013. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management and private equity. Under the J.P. Morgan and Chase brands, the Firm serves millions of customers in the U.S. and many of the world’s most prominent corporate, institutional and government clients.

JPMorgan Chase’s activities are organized, for management reporting purposes, into
four
major reportable business segments, as well as a Corporate/Private Equity segment. The Firm’s consumer business is the Consumer & Community Banking segment. The Corporate & Investment Bank, Commercial Banking, and Asset Management segments comprise the Firm’s wholesale businesses. A description of the Firm’s business segments, and the products and services they provide to their respective client bases, follows.

Consumer & Community Banking

Consumer & Community Banking (“CCB”) serves consumers and businesses through personal service at bank branches and through ATMs, online, mobile and telephone banking. CCB is organized into Consumer & Business Banking, Mortgage Banking (including Mortgage Production, Mortgage Servicing and Real Estate Portfolios) and Card, Merchant Services & Auto (“Card”). Consumer & Business Banking offers deposit and investment products and services to consumers, and lending, deposit, and cash management and payment solutions to small businesses. Mortgage Banking includes mortgage origination and servicing activities, as well as portfolios comprised of residential mortgages and home equity loans, including the purchased credit-impaired (“PCI”) portfolio acquired in the Washington Mutual transaction. Card issues credit cards to consumers and small businesses, provides payment services to corporate and public sector clients through its commercial card products, offers payment processing services to merchants, and provides auto and student loan services.

Corporate & Investment Bank

The Corpora
te & Investment Bank (“CIB”) comprised of Banking and Markets & Investor Services, off
ers a broad suite of investment banking, market-making, prime brokerage, and treasury and securities products and services to a global client base of corporations, investors, financial institutions, government and municipal entities. Within Banking, the CIB offers a full range of investment banking products and services in all major capital markets, including advising on corporate strategy and structure, capital-raising in equity and debt markets, as well as loan origination and syndication. Also included in Banking is Treasury Services, which includes transaction services, comprised primarily of cash management and liquidity solutions, and trade finance products. The Markets & Investor Services segment of the CIB is a global market-maker in cash securities and derivative instruments, and also offers sophisticated risk management solutions, prime brokerage, and research. Markets & Investor Services also includes the Securities Services business, a leading global custodian which includes custody, fund accounting and administration, and securities lending products sold principally to asset managers, insurance companies and public and private investment funds
.

4

Commercial Banking

Commercial Banking (“CB”) delivers extensive industry knowledge, local expertise and dedicated service to U.S. and U.S. multinational clients, including corporations, municipalities, financial institutions and nonprofit entities with annual revenue generally ranging from $20 million to
$2 billion
. CB provides financing to real estate investors and owners. Partnering with the Firm’s other businesses, CB provides comprehensive financial solutions, including lending, treasury services, investment banking and asset management to meet its clients’ domestic and international financial needs.

Asset Management

Asset Management (“AM”), with client assets of
$2.2 trillion
as of June 30, 2013, is a global leader in investment and wealth management. AM clients include institutions, high-net-worth individuals and retail investors in every major market throughout the world. AM offers investment management across all major asset classes including equities, fixed income, alternatives and money market funds. AM also offers multi-asset investment management, providing solutions to a broad range of clients’ investment needs. For individual investors, AM also provides retirement products and services, brokerage and banking services, including trust and estate, loans, mortgages and deposits. The majority of AM’s client assets are in actively managed portfolios.

In addition to the four major reportable business segments outlined above, the following is a description of the Corporate/Private Equity segment.

Corporate/Private Equity

The Corporate/Private Equity segment comprises Private Equity, Treasury and Chief Investment Office (“CIO”), and Other Corporate, which includes corporate staff units and expense that is centrally managed. Treasury and CIO are predominantly responsible for measuring, monitoring, reporting and managing the Firm’s liquidity, funding, capital and structural interest rate and foreign exchange risks. The major corporate staff units include Central Technology and Operations, Internal Audit, Executive, Finance, Human Resources, Legal, Compliance, Global Real Estate, Operational Control, Risk Management, and Corporate Responsibility & Public Policy. Other centrally managed expense includes the Firm’s occupancy and pension-related expense that are subject to allocation to the businesses.

5

EXECUTIVE OVERVIEW

This executive overview of the MD&A highlights selected information and may not contain all of the information that is important to readers of this Form 10-Q. For a complete description of trends and uncertainties, as well as the risks and critical accounting estimates affecting the Firm and its various lines of business, this Form 10-Q should be read in its entirety.

Economic environment

The U.S. economy continued to grow at a modest pace in the second quarter 0f 2013 amid a contraction in government spending and slower consumer spending. The U.S. unemployment rate held steady a
t 7.6% in the second quarter accompanied by slow growth of the labor force. Inflation, already below the Federal Reserve’s 2% long-run target, eased further to 1%.

In the housing market, prices continued to increase and new home sales rose to the highest level in five years during the second quarter. The increase in household wealth from rising home prices and stock markets, coupled with still-low interest rates, both of which support consumer borrowing, have counterbalanced the increase in Social Security payroll taxes following passage of the American Taxpayer Relief Act of 2012 on December 31, 2012. The Federal budget deficit continued to decline in parallel with the ongoing economic recovery; after peaking at 10.5% of GDP in early 2010, it was down to 4.4% over the last twelve months.

Against the backdrop of the improving labor market, the Federal Reserve indicated it could begin tapering its quantitative easing program if the job market improved further and inflation increased. Following Federal Reserve Chairman Ben Bernanke’s remarks during the quarter that such tapering could begin in 2013, longer-term bond yields rose sharply. U.S. and international stock market indices declined at first and later recovered to new highs amid less conviction about near-term tapering.

In Europe, both the Bank of England and the European Central Bank held benchmark rates steady and indicated that policy was likely to remain accommodative for a considerable time given tight credit conditions, little growth, and elevated unemployment. Although the economies of Spain and Italy contracted further in the second quarter, several of the economies in northern Europe expanded at a moderate pace.

Asian economies have slowed in response to the economic situation in Europe. India announced the slowest GDP growth since 2003 and China’s government reduced its GDP growth target for the next decade to 7.5%
. In Japan, the Bank of Japan announced an asset purchase program aimed at boosting its inflation rate. Subsequent to this announcement, Japanese stocks and currency have experienced increased volatility given uncertainty about the impact of new policies.

Across Latin America, growth remained slow, but accelerated moderately in the second quarter.

Financial performance of JPMorgan Chase

Three months ended June 30,

Six months ended June 30,

(in millions, except per share data and ratios)

2013

2012

Change

2013

2012

Change

Selected income statement data

Total net revenue

$

25,211

$

22,180

14

%

$

50,333

$

48,232

4

%

Total noninterest expense

15,866

14,966

6

31,289

33,311

(6

)

Pre-provision profit

9,345

7,214

30

19,044

14,921

28

Provision for credit losses

47

214

(78

)

664

940

(29

)

Net income

6,496

4,960

31

13,025

9,884

32

Diluted earnings per share

1.60

1.21

32

%

3.19

2.41

32

%

Return on common equity

13

%

11

%

13

%

11

%

Capital ratios

Tier 1 capital

11.6

11.3

Tier 1 common
(a)

10.4

9.9

(a)

Basel I Tier 1 common capital ratio (“Tier 1 common ratio”) is Tier 1 common capital (“Tier 1 common”) divided by risk-weighted assets. The Firm uses Tier 1 common capital along with the other capital measures to assess and monitor its capital position. For further discussion of the Tier 1 common ratio, see Regulatory capital on pages
60–63
of this Form 10-Q.

Business Overview

JPMorgan Chase reported second-quarter 2013 net income of $6.5 billion, or $1.60 per share, on net revenue of $25.2 billion. Net income increased by $1.5 billion, or 31%, compared with net income of $5.0 billion, or $1.21 per share, in the second quarter of 2012. Return on equity for the quarter was 13%, compared with 11% for the prior-year quarter. Results in the second quarter of 2013

included the following significant items: $950 million pretax benefit ($0.15 per share after-tax increase in earnings) from a reduction in the allowance for loan losses in Real Estate Portfolios; $550 million pretax benefit ($0.09 per share after-tax increase in earnings) from a reduction in the allowance for loan losses in Card Services; and approximately $600 million pretax expense ($0.09 per

6

share after-tax decrease in earnings) for additional litigation reserves in Corporate. The tax rate used for each of the above significant items is 38%; for additional information, see the discussion at the end of this section on page
9
.

The increase in net income from the second quarter of 2012 was driven by higher net revenue and lower provision for credit losses, partially offset by higher noninterest expense. The increase in net revenue compared with the prior year was due to higher principal transactions revenue, investment banking fees, and higher asset management, administration and commission revenue, partially offset by lower securities gains and lower mortgage fees and related income. The increase in principal transactions revenue reflected: the absence of $4.4 billion of losses on CIO’s synthetic credit portfolio, which was recorded in the second quarter of the prior year, partially offset this year by a lower gain from debit valuation adjustments (“DVA”) on structured notes and derivative liabilities of
$355 million
resulting from the widening of the Firm’s credit spreads, compared with a DVA gain of
$755 million
in the prior year. Net interest income decreased compared with the prior year, reflecting the impact of lower loan yields due to competitive pressures and loan portfolio run-off and the impact of low interest rates on investment securities yield and reinvestment opportunities, partially offset by lower long-term debt costs primarily due to a change in funding mix, and lower deposit costs.

Results in the second quarter of 2013 reflected lower estimated losses due to improved delinquency trends in the residential real estate and credit card portfolios, as well as the impact of improved home prices on the residential real estate portfolio. The provision for credit losses was $47 million, down $167 million, or 78%, from the prior year. The total consumer provision for credit losses was a benefit of $29 million in the 2013 second quarter, compared with a provision of $171 million in the prior year. The current-quarter consumer provision included a $1.5 billion reduction in the allowance for loan losses, down from a $2.1 billion reduction in the prior year. Consumer net charge-offs were $1.5 billion, compared with $2.3 billion in the prior year, resulting in net charge-off rates of 1.66% and 2.51%, respectively, excluding in each year the PCI portfolio. The decrease in consumer net charge-offs was primarily due to favorable delinquency trends. A favorable credit environment and stable credit trends also prevailed across the Firm’s wholesale loan portfolios as the Firm continued to experience low levels of criticized exposure, nonaccrual loans and net charge-offs. The wholesale provision for credit losses was $76 million, compared with $43 million in the prior year. Wholesale net recoveries were $67 million, compared with net charge-offs of $9 million in the prior year, resulting in a net recovery rate of 0.09% and a net charge-off rate of 0.01%, respectively. The Firm’s allowance for loan losses to end-of-period loans retained was 2.06%, compared with 2.74% in the prior year,

excluding in each year the PCI portfolio. The Firm’s nonperforming assets totaled $10.9 billion at June 30, 2013, down from $11.6 billion in the prior quarter and down from $11.4 billion in the prior year.

Noninterest expense was $15.9 billion, up $900 million, or 6%, compared with the prior year, driven by higher compensation expense on higher revenue and higher litigation expense, partially offset by lower mortgage servicing expense. The current quarter included $678 million of expense for additional litigation reserves, compared with $323 million in the prior year.

The Firm’s results reflected strong performance across its businesses. CCB average deposits were up 10%. Mortgage originations were $49.0 billion, up 12% compared with the prior year. Credit Card sales volume was a record $105.2 billion, up 10% from the prior year. CIB reported strong performance across products and maintained its #1 ranking for Global Investment Banking fees. CIB assets under custody were $18.9 trillion, up 7% compared with the prior year, while average client deposits and other third party liabilities were up 6% compared with the prior year. AM reported positive net long-term product flows for the seventeenth consecutive quarter, total client assets of $2.2 trillion and record loan balances of $86.0 billion.

Net income for the first six months of 2013 was $13.0 billion, or $3.19 per share, compared with $9.9 billion, or $2.41 per share, in the first half of 2012. The increase was driven by an increase in net revenue, a decrease in noninterest expense and a decrease in provision for credit losses. The increase in net revenue for the first six months of the year was driven by higher principal transactions revenue, reflecting the absence of $5.8 billion of losses from the CIO’s synthetic credit portfolio and a $545 million recovery on a Bear Stearns-related subordinated loan in the first half of 2012, higher asset management, administration and commissions, and higher investment banking fees. Largely offsetting these items were lower net interest income, the absence of the $1.1 billion benefit from the Washington Mutual bankruptcy settlement, lower mortgage fees and related income, and lower securities gains. The lower provision for credit losses reflected an improved credit environment. The decrease in noninterest expense was driven by lower litigation expense.

The Firm strengthened its balance sheet, ending the second quarter with Basel I Tier 1 common capital of $147 billion and a Tier 1 common ratio of 10.4%, including the impact of Basel 2.5 rules that became effective at the beginning of this year. The Firm estimated that its Basel III Tier 1 common ratio was approximately 9.3% at June 30, 2013, including the estimated impact of final Basel III rules issued in July 2013. (The Basel I and III Tier 1 common ratios are non- GAAP financial measures, which the Firm uses along with the other capital measures to assess and monitor its capital position. For further discussion of the Tier 1

7

common capital ratios, see Regulatory capital on pages
60–63
of this Form 10-Q.)

JPMorgan Chase continued to support clients, consumers, companies, and communities around the globe. The Firm provided credit and raised capital of $1.0 trillion for commercial and consumer clients in the first six months of 2013. This included nearly $9 billion of credit provided for U.S. small businesses and $294 billion of credit provided for corporations. This also included more than $552 billion of capital for clients and more than $35 billion of credit provided to, and capital raised for, nonprofit and government entities, including states, municipalities, hospitals and universities.

Consumer & Community Banking
net income decreased due to lower net revenue and higher noninterest expense, partially offset by lower provision for credit losses. Net revenue decreased, driven by lower noninterest revenue and net interest income. Noninterest revenue decreased, driven by lower mortgage fees and related income, partially offset by higher merchant servicing revenue, auto lease income and net interchange income. Net interest income decreased, driven by lower deposit margins and lower loan balances due to portfolio runoff, largely offset by higher deposit balances. The provision for credit losses was a benefit of $19 million, compared with a provision for credit losses of $179 million in the prior year. The current-quarter provision reflected a $1.5 billion reduction in the allowance for loan losses and total net charge-offs of $1.5 billion. The prior-year provision reflected a $2.1 billion reduction in the allowance for loan losses and total net charge-offs of $2.3 billion. Noninterest expense increased in the second quarter of 2013 compared with the prior year, driven by continued investments in the business, offset by lower mortgage servicing expense and lower remediation expense, inclusive of a current-quarter charge, related to an exited non-core product. Return on equity for the second quarter of 2013 was 27% on $46.0 billion of average allocated capital.

Corporate & Investment Bank
net income increased compared with the prior year, reflecting higher net revenue, partially offset by higher noninterest expense. Net revenue for the second quarter of 2013 included a $355 million DVA gain on structured notes and derivative liabilities resulting from the widening of the Firm’s credit spreads, compared with a DVA gain of $755 million in the prior year. The increase in net revenue also reflected higher investment banking fees and higher Markets revenue from credit-related and equities products. Noninterest expense increased from the prior year, primarily driven by higher compensation expense on increased revenue. Return on equity for the second quarter of 2013 was 20%, or 19% excluding DVA (a non-GAAP financial measure), on $56.5 billion of average allocated capital.

Commercial Banking
net income decreased compared with the prior year, reflecting a higher provision for credit losses and an increase in noninterest expense, partially offset by higher net revenue. Net revenue was slightly higher compared with the prior year, driven by higher loan and liability balances, deposit-related fees, credit card revenue, and investment banking fees, partially offset by lower purchase discounts recognized on loan repayments, spread compression on liability products and lower community development investment-related revenue. Noninterest expense increased compared with the prior year, reflecting higher headcount-related expense and increased operating expense for Commercial Card. Return on equity for the second quarter of 2013 was 18% on $13.5 billion of average allocated capital.

Asset Management
net income increased compared with the prior year, reflecting higher net revenue, largely offset by higher noninterest expense. Noninterest revenue increased due to the effect of higher market levels, net client inflows, and higher performance fees. Net interest income increased due to higher loan and deposit balances, partially offset by narrower deposit and loan spreads. Noninterest expense increased from the prior year, primarily due to higher performance-based compensation and headcount-related expense. Return on equity for the second quarter of 2013 was 22% on $9.0 billion of average allocated capital.

Corporate/Private Equity
net income was a loss of $552 million, compared with a loss of $1.8 billion in the prior year.

Private Equity reported net income of $212 million, compared with net income of $197 million in the prior year. Net revenue was $410 million, same as prior year.

Treasury and CIO reported a net loss of $429 million, compared with a net loss of $2.1 billion in the prior year. Net revenue was a loss of $648 million, compared with a loss of $3.4 billion in the prior year. The prior-year loss reflected $4.4 billion of principal transactions losses from the synthetic credit portfolio that had been held by CIO, partially offset by net securities gains of $1.0 billion. Net revenue in the current quarter included net securities gains of $123 million from sales of available-for-sale investment securities and a modest loss related to the redemption of trust preferred securities. Current-quarter net interest income was a loss of $558 million due to low interest rates and limited reinvestment opportunities.

Other Corporate reported a net loss of $335 million, compared with net income of $119 million in the prior year. Noninterest revenue included $545 million in the prior year related to the gain on the recovery of a Bear Stearns-related subordinated loan. The current quarter included approximately $600 million of expense for additional litigation reserves, compared with $335 million of expense for additional litigation reserves in the prior year.

8

Note: The Firm uses a single U.S.-based, blended marginal tax rate of 38% (“the marginal rate”) to report the estimated after-tax effects of each significant item affecting net income. This rate represents the weighted-average marginal tax rate for the U.S. consolidated tax group. The Firm uses this single marginal rate to reflect the tax effects of all significant items because (a) it simplifies the presentation and analysis for management and investors; (b) it has proved to be a reasonable estimate of the marginal tax effects; and (c) often there is uncertainty at the time a significant item is disclosed regarding its ultimate tax outcome.

2013 Business outlook

The following forward-looking statements are based on the current beliefs and expectations of JPMorgan Chase’s management and are subject to significant risks and uncertainties. These risks and uncertainties could cause the Firm’s actual results to differ materially from those set forth in such forward-looking statements. See Forward-Looking Statements on page
107
and Risk Factors on page
218
of this Form 10-Q.

JPMorgan Chase’s outlook for the remainder of 2013 should be viewed against the backdrop of the global and U.S. economies, financial markets activity, the geopolitical environment, the competitive environment, client activity levels, and regulatory and legislative developments in the U.S. and other countries where the Firm does business. Each of these linked factors will affect the performance of the Firm and its lines of business.

The Firm expects that net interest income for the third quarter of 2013 will be up modestly from the second quarter, and that net interest margin will be relatively stable for the second half of 2013.

In Mortgage Banking within CCB, management expects to continue to incur elevated default- and foreclosure-related costs, including additional costs associated with the Firm’s mortgage servicing processes, particularly its loan modification and foreclosure procedures. The Firm also expects there will be continued elevated levels of repurchases of mortgages previously sold, predominantly to U.S. government-sponsored entities (“GSEs”). However, based on current trends and estimates, management believes that the existing mortgage repurchase liability is sufficient to cover such losses.

Primary mortgage interest rates increased during the second quarter of 2013; if such rates remain at or above current levels, management estimates that the mortgage loan origination market in the U.S., including refinance and purchase, could be reduced by 30% to 40% during the second half of 2013, compared with the first half of the year. Management expects such a market environment to have a negative impact on refinancing volumes and margins, and, accordingly, the profitability of Mortgage Production within Mortgage Banking will likely be challenged.

For Real Estate Portfolios within Mortgage Banking, total net charge-offs for the third quarter are expected to be less than $250 million. If net charge-offs and delinquencies continue to trend down, the related allowance for loan losses for non credit impaired loans could be reduced over time. Additionally with continued, sustained improvement in home prices and delinquencies, the allowance for loan losses for purchased credit impaired loans could also be reduced over time.

In the Card Services business within Card, Merchant Services & Auto, the Firm expe
cts that, if current credit trends in the credit card portfolio, including lower delinquency rates and lower balances of restructured loans, continue to improve, the related allowance for loan losses has the potential to be reduced during the second half of 2013. Management expects loan balances in Card Services could increase modestly during the second half of 2013, primarily driven by increased credit card sales volume and lower portfolio run-off.

CCB’s results will continue to be affected by U.S. economic conditions, including housing prices and the unemployment rate. Management continues to closely monitor the portfolios in these businesses.

In Private Equity, within the Corporate/Private Equity segment, earnings will likely continue to be volatile and influenced by capital markets activity, market levels, the performance of the broader economy and investment-specific factors.

For Treasury and CIO, within the Corporate/Private Equity segment, management currently believes that it may generate a quarterly net loss of approximately $300 million for the remainder of 2013, although that amount may vary each quarter driven by the implied yield curve and management decisions related to the positioning of the investment securities portfolio.

For Other Corporate, within the Corporate/Private Equity segment, management expects quarterly net income, excluding material litigation expense and significant items, if any, to be approximately $100 million, but this amount is also likely to vary each quarter.

Regulatory developments

JPMorgan Chase is subject to regulation under state and federal laws in the U.S., as well as the applicable laws of each of the various other jurisdictions outside the U.S. in which the Firm does business. The Firm is currently experiencing an unprecedented increase in regulation and supervision, and such changes could have a significant impact on how the Firm conducts business. In July 2013, the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Office of the Comptroller of the Currency (the “OCC”), and the Federal Deposit Insurance Corporation (the “FDIC”) approved the final rules for implementing Basel III in the U.S. The final rules narrowed the definition of capital, increased capital requirements for

9

certain exposures, set higher capital ratio requirements and minimum floors with respect the capital ratio requirements, and included a supplementary leverage ratio. The supplementary leverage ratio is defined as Tier I capital under Basel III divided by the Firm’s total leverage exposure, which is calculated by taking the Firm’s total average on-balance sheet assets, less amounts permitted to be deducted for Tier I capital, and adding certain off-balance sheet exposures, such as undrawn commitments and certain derivatives exposures. Following approval of the final Basel III rules, the U.S. banking agencies issued proposed rulemaking relating to the supplementary leverage ratio that would require U.S. bank holding companies, including JPMorgan Chase, to have a supplementary leverage ratio of at least 5%, and insured depositary institutions (“IDI”), including JPMorgan Chase Bank, N.A. and Chase Bank USA, N.A., to have a supplementary leverage ratio of at least 6%. The Firm estimates, based on its current understanding of the proposed rules, that if the rules were in effect at June 30, 2013, JPMorgan Chase’s leverage ratio at such date would have been approximately 4.7%. Management’s current objective is for the Firm to comply with the minimum supplementary leverage ratio by the beginning of 2015. This objective is based upon management’s current understanding of the proposed rules. The actual timeframe for the Firm to meet the minimum supplementary leverage ratio could depend on changes to the proposed rules and any further guidance from regulators.
For further information about the supplementary leverage ratio, as well as additional information regarding Basel III, see Regulatory capital on pages
60–63
of this Form 10-Q.

On July 31, 2013, the U.S. District Court for the District of Columbia ruled that the Federal Reserve exceeded its authority in the manner it set a cap on debit card transaction interchange fees and established network exclusivity prohibitions in its regulation implementing the Durbin Amendment provisions of the Dodd-Frank Act. While the court’s ruling introduces uncertainty about the amount of interchange fees large banks may earn on debit card transactions in the future, and about how debit card transactions will be routed over payment networks in the future, the court said that the Federal Reserve’s current regulations would remain in effect for an as yet undetermined period of time to provide the Federal Reserve an opportunity to promulgate interim debit interchange standards or new regulations. The Federal Reserve has not yet announced whether it intends to appeal the decision. The Firm is assessing the decision, but it is too early for the Firm to determine the extent or timing of any potential negative effects the decision could have on the Firm, as any such effects (and the timing thereof) will depend on numerous factors, including whether the Federal Reserve challenges the decision, the success of any such challenge, and the substance of any new regulations that may be promulgated.

Rule making under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), as well as other federal banking laws, by the Federal Reserve, the OCC, and the FDIC, as well as by the Commodities Futures Trading Commission, the Securities Exchange Commission, and the Bureau of Consumer Financial Protection will be continuing. The Firm continues to work diligently in assessing and understanding the implications of the regulatory changes it is facing, and is devoting substantial resources to implementing all the new regulations while, at the same time, best meeting the needs and expectations of its clients.

The Firm is also experiencing heightened scrutiny by its regulators of its compliance with new and existing regulations, and with respect to its controls and operational processes. As previously disclosed, the Firm is subject to several Consent Orders with the Federal Reserve and the OCC, including those related to the Firm’s and certain of its bank subsidiaries’ Bank Secrecy Act/Anti-Money Laundering (“BSA/AML”) policies and procedures, and with regard to the risk management, model governance, and other control functions related to CIO and certain other trading activities at the Firm. The Firm expects that its banking supervisors will in the future continue to take more formal enforcement actions against the Firm (including Consent Orders related to certain non-mortgage consumer collections practices and certain sales of an ancillary identity theft protection product) rather than issuing informal supervisory actions or criticisms.

In addition, in the ordinary course of its business, the Firm is subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, restitution, disgorgement, injunctions, or other relief. In addition, certain affiliates and subsidiaries of the Firm are banks, registered broker-dealers, futures commission merchants, investment advisers or other regulated entities and, in those capacities, are subject to regulation by various U.S., state and foreign securities, banking, commodities futures, consumer protection and other regulators. In connection with formal and informal inquiries by these regulators, the Firm and such affiliates and subsidiaries receive numerous requests, subpoenas and orders seeking documents, testimony and other information in connection with various aspects of their regulated activities. For example, the Firm is responding to and cooperating with the following examinations, inquiries and/or investigations:

▪

Examination requests from several states relating to unclaimed property and the Firm’s compliance with escheatment laws.

•

Requests for information from the U.S. Attorney’s
Office for the District of Connecticut, subpoenas and requests from the SEC Division of Enforcement, and a request from the Office of the Special Inspector General for the Troubled Asset Relief Program to conduct a review of

10

certain activities, all of which relate to, among other matters, communications with counterparties in connection with certain mortgage-backed securities transactions.

▪

A request from the SEC Division of Enforcement seeking information and documents relating to, among other matters, the Firm’s employment of certain former employees in Hong Kong and its business relationships with certain clients.

▪

A request for information from the New York State Department of Financial Services relating to forbearance practices for loans serviced by the Firm that are secured by residential property in Superstorm Sandy FEMA-designated counties in New York State.

▪

A request from the New York Attorney General’s Office seeking documents and information relating to, among other things, the use of services and data provided by consumer credit screening companies and the Firm’s compliance with the Fair Credit Reporting Act, the Equal Credit Opportunity Act and other laws.

▪

A request from the U.S. Department of Labor for documents and information relating to the Firm’s foreign exchange practices pursuant to the Employee Retirement Income Security Act of 1974.

While the effect of the changes in law and the heightened scrutiny of its regulators are likely to result in additional costs, the Firm cannot, given the current status of regulatory and supervisory developments, quantify the possible effects on its business and operations of all the significant changes that are currently underway. For further discussion of regulatory developments, see Supervision and regulation on pages 1–8 and Risk factors on pages 8–21 of JPMorgan Chase’s 2012 Form 10-K.

Business events

Issuance of preferred stock

On February 5, 2013 the Firm issued
$900 million
of noncumulative preferred stock. On April 23, 2013 the Firm issued
$1.5 billion
of noncumulative preferred stock. For additional information on the Firm’s preferred stock, see Note 22 on page 300 of the Firm’s 2012 Annual Report.

Redemption of outstanding trust preferred securities

On May 8, 2013, the Firm redeemed approximately
$5.0 billion
, or
100%
of the liquidation amount, of the following eight series of trust preferred securities: JPMorgan Chase Capital X, XI, XII, XIV, XVI, XIX, XXIV, and BANK ONE Capital VI. For a further discussion of trust preferred securities, see Note 21 on pages 297–299 of JPMorgan Chase’s 2012 Annual Report.

Increase in common stock dividend

On May 21, 2013, the Board of Directors increased the Firm’s quarterly common stock dividend from $0.30 per share to $0.38 per share, effective with the dividend paid on July 31, 2013, to shareholders of record on July 5, 2013.

One Equity Partners

As announced on June 14, 2013, One Equity Partners (“OEP”) will raise its next fund from an external group of limited partners and then become independent from JPMorgan Chase. Until it becomes independent from the Firm, OEP will continue to make direct investments for JPMorgan Chase, and thereafter will continue to manage the then-existing group of portfolio companies for JPMorgan Chase to maximize value for the Firm.

Subsequent events

On July 26, 2013, the Firm announced that it is pursuing strategic alternatives for its physical commodities businesses, including its remaining holdings of commodities assets and its physical trading operations. The Firm will explore a full range of options over time, including, but not limited to: a sale, spin off or strategic partnership. During the process, the Firm will continue to run its physical commodities business as a going concern. The Firm remains fully committed to its traditional banking activities in the commodity markets, including financial derivatives and the vaulting and trading of precious metals.

On July 29, 2013, the Firm issued
$1.5 billion
of noncumulative preferred stock. On August 1, 2013, the Firm announced that it would redeem all of its outstanding
8.625%
noncumulative preferred stock, Series J on September 1, 2013. For additional information on the Firm’s preferred stock, see Note 22 on page 300 of the Firm’s 2012 Annual Report.

11

CONSOLIDATED RESULTS OF OPERATIONS

The following section provides a comparative discussion of JPMorgan Chase’s Consolidated Results of Operations on a reported basis for the three and six months ended
June 30, 2013 and 2012
. Factors that relate primarily to a single business segment are discussed in more detail within that

business segment. For a discussion of the Critical Accounting Estimates Used by the Firm that affect the Consolidated Results of Operations, see pages
104–106
of this Form 10-Q and pages 178–182 of JPMorgan Chase’s 2012 Annual Report.

Revenue

Three months ended June 30,

Six months ended June 30,

(in millions)

2013

2012

Change

2013

2012

Change

Investment banking fees

$

1,717

$

1,257

37

%

$

3,162

$

2,638

20

%

Principal transactions

3,760

(427

)

NM

7,521

2,295

228

Lending- and deposit-related fees

1,489

1,546

(4

)

2,957

3,063

(3

)

Asset management, administration and commissions

3,865

3,461

12

7,464

6,853

9

Securities gains

124

1,014

(88

)

633

1,550

(59

)

Mortgage fees and related income

1,823

2,265

(20

)

3,275

4,275

(23

)

Card income

1,503

1,412

6

2,922

2,728

7

Other income
(a)

226

506

(55

)

762

2,018

(62

)

Noninterest revenue

14,507

11,034

31

28,696

25,420

13

Net interest income

10,704

11,146

(4

)

21,637

22,812

(5

)

Total net revenue

$

25,211

$

22,180

14

%

$

50,333

$

48,232

4

%

(a)

Included operating lease income of
$363 million
and
$328 million
for the three months ended June 30, 2013 and 2012, respectively, and
$712 million
and
$651 million
for the six months ended June 30, 2013 and 2012, respectively.

Total net revenue for the three months ended June 30, 2013, was
$25.2 billion
, an increase of
$3.0 billion
, or
14%
, compared with the three months ended June 30, 2012. For the six months ended June 30, 2013, total net revenue was
$50.3 billion
, an increase of
$2.1 billion
, or
4%
, from the same period of the prior year. In both periods, higher principal transactions revenue, investment banking fees, and asset management, administration and commissions revenue were offset partially by lower securities gains, mortgage fees and related income, net interest income and other income.

Investment banking fees for both the three and six months ended June 30, 2013, increased compared with the prior year, due to higher debt and equity underwriting fees. Despite weaker credit markets towards the end of the second quarter of 2013, the Firm’s debt underwriting fees in the first half of 2013 were close to historical records, driven in part by record industry-wide high-yield bond issuance. In equity capital markets, the Firm ranked #1 in wallet share for the first half of 2013, according to Dealogic. For additional information on investment banking fees, which are primarily recorded in CIB, see CIB segment results pages
34–40
and Note 6 on pages
143–144
of this Form 10-Q.

Principal transactions revenue increased significantly for both the three and six months ended June 30, 2013, compared with the prior year. The prior year periods included
$4.4 billion
and
$5.8 billion
, respectively, of losses on the synthetic credit portfolio that had been held by CIO. The current year periods reflected solid client revenue in fixed income and equity markets, partially offset by lower

private equity gains in the six months of 2013, and the absence of a
$545 million
gain recognized in the second quarter of 2012 in Other Corporate, representing the recovery on a Bear Stearns-related subordinated loan. The three and six month periods of 2013 included a DVA gain on structured notes and derivative liabilities of
$355 million
and
$481 million
, respectively, compared with a DVA gain of
$755 million
and a DVA loss of
$152 million
for the three and six month periods of 2012, respectively, as a result of changes in
the Firm’s credit spreads. For additional information on principal transactions revenue, see CIB and Corporate/Private Equity segment results on pages
34–40
and
49–51
, respectively, and Note 6 on pages
143–144
of this Form 10-Q.

Lending- and deposit-related fees decreased modestly compared with both the three and six months ended June 30, 2012. The decrease was predominantly due to lower deposit-related fees in CCB, resulting from reductions in certain product and transaction fees. For additional information on lending- and deposit-related fees, which are mostly recorded in CCB, CIB and CB, see the segment results for CCB on pages
19–33
, CIB on pages
34–40
and CB on pages
41–44
of this Form 10-Q.

Asset management, administration and commissions revenue increased compared with both the three and six months ended June 30, 2012. The increase was driven by higher investment management fees in AM, due to the effect of higher market levels, net client inflows and higher performance fees, as well as increased investment sales revenue in CCB. For additional information on these fees and commissions, see the segment discussions for CCB on

12

pages
19–33
, AM on pages
45–48
, and Note 6 on pages
143–144
of this Form 10-Q.

Securities gains decreased compared with both prior-year periods, reflecting the results of repositioning the CIO available-for-sale (“AFS”) portfolio. For additional information on securities gains, which are predominantly recorded in the Firm’s Corporate/Private Equity segment, see the Corporate/Private Equity segment discussion on pages
49–51
, and Note 11 on pages
147–150
of this Form 10-Q.

Mortgage fees and related income decreased compared with both prior-year periods. The decrease resulted from lower mortgage production revenue and mortgage servicing revenue. The decrease in mortgage production revenue reflected lower revenue margins due to tightening of primary/secondary spreads, as well as pricing pressure due to increased capacity in the market, partially offset by higher volumes. The decrease in mortgage servicing revenue was predominantly due to lower mortgage servicing rights (“MSR”) risk management results. For additional information on mortgage fees and related income, which is recorded predominantly in CCB, see CCB’s Mortgage Production and Mortgage Servicing discussion on pages
25–28
, and Note 16 on pages
184–187
of this

Form 10-Q.

Card income increased compared with the three and six months ended June 30, 2012. The increase was driven by higher net interchange income on credit and debit cards, and higher merchant servicing revenue, both due to growth

in business volume. For additional information on credit card income, see the CCB segment results on pages
19–33
of this Form 10-Q.

Other income decreased compared with the three and six months ended June 30, 2012. The three months ended June 30, 2013, included a modest loss recorded on the redemption of trust preferred securities. The six months ended June 30, 2012 reflected a
$1.1 billion
benefit from the Washington Mutual bankruptcy settlement. The decrease compared with the three and six months ended June 30, 2012 was offset partially by higher revenue from client-driven activity in CIB.

Net interest income decreased compared with the three and six months ended June 30, 2012. The decrease primarily reflects the impact of lower loan yields due to competitive pressures and loan portfolio run-off, the impact of low interest rates on investment securities yield and reinvestment opportunities, partially offset by lower long-term debt costs, primarily due to a change in funding mix, and lower deposit costs. The Firm’s average interest-earning assets were
$2.0 trillion
for the three months ended June 30, 2013, and the net interest yield on those assets, on a fully taxable-equivalent (“FTE”) basis, was
2.20%
, a decrease of
27
basis points from the prior year. For the six months ended June 30, 2013, the Firm’s average interest-earning assets were
$1.9 trillion
, and the net interest yield on those assets, on a FTE basis, was
2.28%
, a decrease of
26
basis points from the prior year.

Provision for credit losses

Three months ended June 30,

Six months ended June 30,

(in millions)

2013

2012

Change

2013

2012

Change

Consumer, excluding credit card

$

(493

)

$

(424

)

(16

)%

$

(530

)

$

(423

)

(25

)%

Credit card

464

595

(22

)

1,046

1,231

(15

)

Total consumer

(29

)

171

NM

516

808

(36

)

Wholesale

76

43

77

148

132

12

Total provision for credit losses

$

47

$

214

(78

)%

$

664

$

940

(29

)%

The provision for credit losses decreased from both the three and six months ended 2012, due to a decline in the provision for total consumer credit losses, partially offset by an increase in the provision for wholesale credit losses. The decline in the total consumer credit losses provision was due to lower net charge-offs offset partially by a smaller reduction in the allowance for loan losses compared with the prior-year periods, reflecting lower estimated losses due to improved delinquency trends in the residential real

estate and credit card portfolios, as well as the impact of improved home prices on the residential real estate portfolio. The wholesale credit losses provision in the current periods reflected stable credit trends. For a more detailed discussion of the credit portfolio and the allowance for credit losses, see the segment discussions for CCB on pages
19–33
, CIB on pages
34–40
and CB on pages
41–44
, and the Allowance for credit losses section on pages
92–94
of this Form 10-Q.

13

Noninterest expense

Three months ended June 30,

Six months ended June 30,

(in millions)

2013

2012

Change

2013

2012

Change

Compensation expense

$

8,019

$

7,427

8

%

$

16,433

$

16,040

2

%

Noncompensation expense:

Occupancy

904

1,080

(16

)

1,805

2,041

(12

)

Technology, communications and equipment

1,361

1,282

6

2,693

2,553

5

Professional and outside services

1,901

1,857

2

3,635

3,652

—

Marketing

578

642

(10

)

1,167

1,322

(12

)

Other expense
(a)(b)

2,951

2,487

19

5,252

7,319

(28

)

Amortization of intangibles

152

191

(20

)

304

384

(21

)

Total noncompensation expense

7,847

7,539

4

14,856

17,271

(14

)

Total noninterest expense

$

15,866

$

14,966

6

%

$

31,289

$

33,311

(6

)%

(a)

Included litigation expense of
$678 million
and
$323 million
for the three months ended June 30, 2013 and 2012, respectively, and
$1.0 billion
and
$3.0 billion
for the six months ended June 30, 2013 and 2012, respectively.

(b)

Included FDIC-related expense of
$392 million
and
$413 million
for the three months ended June 30, 2013 and 2012, respectively, and
$771 million
and
$814 million
for the six months ended June 30, 2013 and 2012, respectively.

Total noninterest expense for the three months ended June 30, 2013, was
$15.9 billion
, up by
$900 million
, or
6%
, compared with the prior year. The increase was due to higher compensation and other expense offset partially by lower occupancy expense. For the six months ended June 30, 2013, total noninterest expense was
$31.3 billion
, down by
$2.0 billion
, or
6%
, compared with the prior year. The decrease was due to lower litigation expense in Corporate/Private Equity.

Compensation expense increased compared with the three and six months ended June 30, 2012, predominantly due to higher performance-based compensation across the businesses, and the impact of investments in the businesses, including front office sales and support staff.

Noncompensation expense increased in the three months ended June 30, 2013, compared with the prior year, due to higher other expense, in particular, litigation expense in Corporate/Private Equity, partially offset by lower

occupancy expense, reflecting the recognition of charges in 2012 related to vacating excess space. For the six months ended June 30, 2013, noncompensation expense decreased due to lower other expense, in particular, litigation expense, as well as lower occupancy expense, which reflected the aforementioned charges in 2012. The decline in litigation expense resulted from the $2.5 billion expense in Corporate/Private Equity recorded in the first quarter of 2012 for additional litigation reserves, predominantly for mortgage-related matters, partially offset by higher litigation expense in CIB in the current year. In addition to the above factors, there were other items contributing to the variances in both periods. The impact of business growth and investments in the businesses was offset partially by lower mortgage servicing and foreclosure-related expense, as well as marketing expense, in CCB. For a further discussion of litigation expense, see Note 23 on pages
198–206
of this Form 10-Q.

Income tax expense

(in millions, except rate)

Three months ended June 30,

Six months ended June 30,

2013

2012

2013

2012

Income before income tax expense

$

9,298

$

7,000

$

18,380

$

13,981

Income tax expense

2,802

2,040

5,355

4,097

Effective tax rate

30.1

%

29.1

%

29.1

%

29.3

%

The increase in the effective tax rate during the three months ended June 30, 2013, compared with the prior year, was predominantly the result of higher reported pretax income in combination with changes in the mix of income and expense subject to U.S. federal and state and local taxes. The decrease in the effective tax rate during the six months ended June 30, 2013, compared with the prior year, was largely attributable to tax benefits recognized in the first quarter of 2013 associated with prior year tax

adjustments and the settlement of tax audits. This was partially offset by the impact of higher reported pretax income in combination with changes in the mix of income and expense subject to U.S. federal and state and local taxes. The prior year included deferred tax benefits associated with state and local income taxes. For additional information on income taxes, see Critical Accounting Estimates Used by the Firm on pages
104–106
of this Form 10-Q.

14

EXPLANATION AND RECONCILIATION OF THE FIRM’S USE OF NON-GAAP FINANCIAL MEASURES

The Firm prepares its consolidated financial statements using accounting principles generally accepted in the U.S. (“U.S. GAAP”); these financial statements appear on pages
108
–
112
of this Form 10-Q. That presentation, which is referred to as “reported” basis, provides the reader with an understanding of the Firm’s results that can be tracked consistently from year to year and enables a comparison of the Firm’s performance with other companies’ U.S. GAAP financial statements.

In addition to analyzing the Firm’s results on a reported basis, management reviews the Firm’s results and the results of the lines of business on a “managed” basis, which is a non-GAAP financial measure. The Firm’s definition of managed basis starts with the reported U.S. GAAP results and includes certain reclassifications to present total net revenue for the Firm (and each of the business segments) on a FTE basis. Accordingly, revenue from investments that receive tax credits and tax-exempt securities is presented in the managed results on a basis comparable to taxable

investments and securities. This non-GAAP financial measure allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The corresponding income tax impact related to tax-exempt items is recorded within income tax expense. These adjustments have no impact on net income as reported by the Firm as a whole or by the lines of business.

Management also uses certain non-GAAP financial measures at the business-segment level, because it believes these other non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the particular business segment and, therefore, facilitate a comparison of the business segment with the performance of its competitors. Non-GAAP financial measures used by the Firm may not be comparable to similarly named non-GAAP financial measures used by other companies.

The following summary table provides a reconciliation from the Firm’s reported U.S. GAAP results to managed basis.

Three months ended June 30,

2013

2012

(in millions, except ratios)

Reported

results

Fully taxable-equivalent adjustments
(a)

Managed

basis

Reported

results

Fully taxable-equivalent adjustments
(a)

Managed

basis

Other income

$

226

$

582

$

808

$

506

$

517

$

1,023

Total noninterest revenue

14,507

582

15,089

11,034

517

11,551

Net interest income

10,704

165

10,869

11,146

195

11,341

Total net revenue

25,211

747

25,958

22,180

712

22,892

Pre-provision profit

9,345

747

10,092

7,214

712

7,926

Income before income tax expense

9,298

747

10,045

7,000

712

7,712

Income tax expense

$

2,802

$

747

$

3,549

$

2,040

$

712

$

2,752

Overhead ratio

63

%

NM

61

%

67

%

NM

65

%

Six months ended June 30,

2013

2012

(in millions, except ratios)

Reported

results

Fully taxable-equivalent adjustments
(a)

Managed

basis

Reported

results

Fully taxable-equivalent adjustments
(a)

Managed

basis

Other income

$

762

$

1,146

$

1,908

$

2,018

$

1,051

$

3,069

Total noninterest revenue

28,696

1,146

29,842

25,420

1,051

26,471

Net interest income

21,637

327

21,964

22,812

366

23,178

Total net revenue

50,333

1,473

51,806

48,232

1,417

49,649

Pre-provision profit

19,044

1,473

20,517

14,921

1,417

16,338

Income before income tax expense

18,380

1,473

19,853

13,981

1,417

15,398

Income tax expense

$

5,355

$

1,473

$

6,828

$

4,097

$

1,417

$

5,514

Overhead ratio

62

%

NM

60

%

69

%

NM

67

%

(a)

Predominantly recognized in CIB and CB business segments and Corporate/Private Equity.

Tangible common equity (“TCE”), ROTCE, tangible book value per share (“TBVS”), and Tier 1 common under Basel I and III rules are each non-GAAP financial measures. TCE represents the Firm’s common stockholders’ equity (i.e., total stockholders’ equity less preferred stock) less goodwill and identifiable intangible assets (other than MSRs), net of related deferred tax liabilities. ROTCE measures the Firm’s

earnings as a percentage of average TCE. TBVS represents the Firm’s tangible common equity divided by period-end common shares. Tier 1 common under Basel I and III rules are used by management, along with other capital measures, to assess and monitor the Firm’s capital position. TCE, ROTCE, and TBVS are meaningful to the Firm, as well as analysts and investors, in assessing the Firm’s use of equity.

15

For additional information on Tier 1 common under Basel I and III, see Regulatory capital on pages
60–63
of this Form10-Q. All of the aforementioned measures are useful

to the Firm, as well as analysts and investors, in facilitating comparisons of the Firm with competitors.

Average tangible common equity

Three months ended June 30,

Six months ended June 30,

(in millions, except per share and ratio data)

2013

2012

2013

2012

Common stockholders’ equity

$

197,283

$

181,021

$

196,016

$

179,366

Less: Goodwill

48,078

48,157

48,123

48,188

Less: Certain identifiable intangible assets

2,026

2,923

2,093

3,029

Add: Deferred tax liabilities
(a)

2,869

2,734

2,849

2,729

Tangible common equity

$

150,048

$

132,675

$

148,649

$

130,878

Return on tangible common equity (“ROTCE”)

17

%

15

%

17

%

15

%

Tangible book value per share

$

39.97

$

35.71

$

39.97

$

35.71

(a)

Represents deferred tax liabilities related to tax-deductible goodwill and to identifiable intangibles created in nontaxable transactions, which are netted against goodwill and other intangibles when calculating TCE.

Core net interest income

In addition to reviewing JPMorgan Chase’s net interest income on a managed basis, management also reviews core net interest income to assess the performance of its core lending, investing (including asset-liability management) and deposit-raising activities (which excludes the impact of CIB’s market-based activities). The core data presented below are non-GAAP financial measures due to the

exclusion of CIB’s market-based net interest income and related assets. Management believes this exclusion provides investors and analysts a more meaningful measure by which to analyze the non-market-related business trends of the Firm and provides a comparable measure to other financial institutions that are primarily focused on core lending, investing and deposit-raising activities.

Core net interest income data
(a)

Three months ended June 30,

Six months ended June 30,

(in millions, except rates)

2013

2012

Change

2013

2012

Change

Net interest income – managed basis
(b)(c)

$

10,869

$

11,341

(4

)%

$

21,964

$

23,178

(5

)%

Less: Market-based net interest income

1,345

1,345

—

2,777

2,914

(5

)

Core net interest income
(b)

$

9,524

$

9,996

(5

)

$

19,187

$

20,264

(5

)

Average interest-earning assets

$

1,980,466

$

1,843,627

7

$

1,938,508

$

1,832,570

6

Less: Average market-based earning assets

512,631

505,282

1

510,796

498,016

3

Core average interest-earning assets

$

1,467,835

$

1,338,345

10

%

$

1,427,712

$

1,334,554

7

%

Net interest yield on interest-earning assets – managed basis

2.20

%

2.47

%

2.28

%

2.54

%

Net interest yield on market-based
activities

1.05

1.07

1.10

1.18

Core net interest yield on core average interest-earning assets

2.60

%

3.00

%

2.71

%

3.05

%

(a)

Includes core lending, investing and deposit-raising activities on a managed basis across the Firm’s business segments and Corporate/Private Equity; excludes the market-based activities within the CIB.

(b)

Interest includes the effect of related hedging derivatives. Taxable-equivalent amounts are used where applicable.

(c)

For a reconciliation of net interest income on a reported and managed basis, see reconciliation from the Firm’s reported U.S. GAAP results to managed basis on page
15
of this Form 10-Q.

Quarterly and year-to-date results

Core net interest income decreased by
$472 million
to
$9.5 billion
and by
$1.1 billion
to
$19.2 billion
for the three and
six months ended
June 30, 2013
, respectively, compared with the prior year periods. Core average interest-earning assets increased by
$129.5 billion
to
$1,467.8 billion
and by
$93.2 billion
to
$1,427.7 billion
for the three and
six months ended
June 30, 2013
, respectively, compared with the prior year periods. The decline in core net interest income primarily reflected the impact of lower loan yields due to competitive pressures and loan portfolio run-off and the impact of low interest rates on investment securities yield and reinvestment opportunities. The decline was partially offset by lower long-term debt costs, primarily due to a change in funding mix, and lower deposit costs. The increase in average interest-earning assets was primarily driven by higher

deposits with banks. The core net interest yield decreased by
40
basis points to
2.60
% and by
34
basis points to
2.71%
for the three and six months ended June 30, 2013, respectively, primarily driven by a significant increase in deposits with banks, lower loan and investment securities yields, partially offset by lower long-term debt costs and deposit rates.

Other financial measures

The Firm also discloses the allowance for loan losses to total retained loans, excluding residential real estate purchased credit-impaired loans. For a further discussion of this credit metric, see Allowance for credit losses on pages
92–94
of this Form 10-Q.

16

BUSINESS SEGMENT RESULTS

The Firm is managed on a line of business basis. The business segment financial results presented reflect the current organization of JPMorgan Chase. There are four major reportable business segments – Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking and Asset Management. In addition, there is a Corporate/Private Equity segment.

The business segments are determined based on the products and services provided, or the type of customer served, and they reflect the manner in which financial information is currently evaluated by management. Results of these lines of business are presented on a managed basis. For a definition of managed basis, see Explanation and Reconciliation of the Firm’s use of non-GAAP financial measures, on pages
15–16
of this Form 10-Q.

Description of business segment reporting methodology

Results of the business segments are intended to reflect each segment as if it were essentially a stand-alone business. The management reporting process that derives business segment results allocates income and expense using market-based methodologies.

For a further discussion of those methodologies, see Business Segment Results – Description of business segment reporting methodology on pages 78–79 of JPMorgan Chase’s 2012 Annual Report. The Firm continues to assess the assumptions, methodologies and reporting classifications used for segment reporting, and further refinements may be implemented in future periods.

Business segment capital allocation changes

Each business segment is allocated capital by taking into consideration stand-alone peer comparisons, regulatory capital requirements (as estimated under Basel III) and economic risk measures. The amount of capital assigned to each business is referred to as equity. Effective January 1, 2013, the Firm further refined the capital allocation framework to align it with the line of business structure described above, which had become effective in the fourth quarter of 2012. The increase in equity levels for the lines of businesses is largely driven by regulatory guidance on Basel III requirements, principally for CIB and CIO, and by anticipated business growth. For further information about these capital changes, see Line of business equity on pages
63–64
of this Form 10-Q.

17

Segment Results – Managed Basis

The following table summarizes the business segment results for the periods indicated.

Three months ended June 30,

Total net revenue
(a)

Total Noninterest expense
(a)

Pre-provision profit/(loss)
(a)

(in millions)

2013

2012

Change

2013

2012

Change

2013

2012

Change

Consumer & Community Banking

$

12,015

$

12,450

(3

)%

$

6,864

$

6,837

—

%

$

5,151

$

5,613

(8

)%

Corporate & Investment Bank

9,876

8,986

10

5,742

5,293

8

4,134

3,693

12

Commercial Banking

1,728

1,691

2

652

591

10

1,076

1,100

(2

)

Asset Management

2,725

2,364

15

1,892

1,701

11

833

663

26

Corporate/Private Equity

(386

)

(2,599

)

85

716

544

32

(1,102

)

(3,143

)

65

Total

$

25,958

$

22,892

13

%

$

15,866

$

14,966

6

%

$

10,092

$

7,926

27

%

Three months ended June 30,

Provision for credit losses

Net income/(loss)
(a)

Return on common equity

(in millions, except ratios)

2013

2012

Change

2013

2012

Change

2013

2012

Consumer & Community Banking

$

(19

)

$

179

NM

$

3,089

$

3,282

(6

)%

27

%

31

%

Corporate & Investment Bank

(6

)

29

NM

2,838

2,376

19

20

20

Commercial Banking

44

(17

)

NM

621

673

(8

)

18

28

Asset Management

23

34

(32

)%

500

391

28

22

22

Corporate/Private Equity

5

(11

)

NM

(552

)

(1,762

)

69

NM

NM

Total

$

47

$

214

(78

)%

$

6,496

$

4,960

31

%

13

%

11

%

Six months ended June 30,

Total net revenue
(a)

Total Noninterest expense
(a)

Pre-provision profit/(loss)
(a)

(in millions)

2013

2012

Change

2013

2012

Change

2013

2012

Change

Consumer & Community Banking

$

23,630

$

24,802

(5

)%

$

13,654

$

13,882

(2

)%

$

9,976

$

10,920

(9

)%

Corporate & Investment Bank

20,016

18,324

9

11,853

11,504

3

8,163

6,820

20

Commercial Banking

3,401

3,348

2

1,296

1,189

9

2,105

2,159

(3

)

Asset Management

5,378

4,734

14

3,768

3,430

10

1,610

1,304

23

Corporate/Private Equity

(619

)

(1,559

)

60

718

3,306

(78

)

(1,337

)

(4,865

)

73

Total

$

51,806

$

49,649

4

%

$

31,289

$

33,311

(6

)%

$

20,517

$

16,338

26

%

Six months ended June 30,

Provision for credit losses

Net income/(loss)
(a)

Return on common equity

(in millions, except ratios)

2013

2012

Change

2013

2012

Change

2013

2012

Consumer & Community Banking

$

530

$

821

(35

)%

$

5,675

$

6,207

(9

)%

25

%

29

%

Corporate & Investment Bank

5

26

(81

)

5,448

4,409

24

19

19

Commercial Banking

83

60

38

1,217

1,264

(4

)

18

27

Asset Management

44

53

(17

)

987

777

27

22

22

Corporate/Private Equity

2

(20

)

NM

(302

)

(2,773

)

89

NM

NM

Total

$

664

$

940

(29

)%

$

13,025

$

9,884

32

%

13

%

11

%

(a)

For the 2012 periods, certain income statement line items were revised to reflect the transfer of certain functions and staff from Corporate/Private Equity to CCB, effective January 1, 2013.

18

CONSUMER & COMMUNITY BANKING

For a discussion of the business profile on CCB, see pages 80–91 of JPMorgan Chase’s 2012 Annual Report and the Introduction on page
4
of this Form 10-Q.

Selected income statement data
(a)

Three months ended June 30,

Six months ended June 30,

(in millions, except ratios)

2013

2012

Change

2013

2012

Change

Revenue

Lending- and deposit-related fees

$

727

$

782

(7

)%

$

1,450

$

1,535

(6

)%

Asset management, administration and commissions

561

540

4

1,094

1,075

2

Mortgage fees and related income

1,819

2,265

(20

)

3,269

4,273

(23

)

Card income

1,445

1,359

6

2,807

2,622

7

All other income

369

343

8

707

770

(8

)

Noninterest revenue

4,921

5,289

(7

)

9,327

10,275

(9

)

Net interest income

7,094

7,161

(1

)

14,303

14,527

(2

)

Total net revenue

12,015

12,450

(3

)

23,630

24,802

(5

)

Provision for credit losses

(19

)

179

NM

530

821

(35

)

Noninterest expense

Compensation expense

2,966

2,917

2

5,972

5,833

2

Noncompensation expense

3,789

3,776

—

7,465

7,758

(4

)

Amortization of intangibles

109

144

(24

)

217

291

(25

)

Total noninterest expense

6,864

6,837

—

13,654

13,882

(2

)

Income before income tax expense

5,170

5,434

(5

)

9,446

10,099

(6

)

Income tax expense

2,081

2,152

(3

)

3,771

3,892

(3

)

Net income

$

3,089

$

3,282

(6

)%

$

5,675

$

6,207

(9

)%

Financial ratios

Return on common equity

27

%

31

%

25

%

29

%

Overhead ratio

57

55

58

56

(a)

For the 2012 periods, certain income statement line items (predominantly net interest income, compensation and noncompensation expense) were revised to reflect the transfer of certain technology and operations, as well as real estate-related functions and staff, from Corporate/Private Equity to CCB, effective January 1, 2013.

Quarterly results

Consumer & Community Banking net income was
$3.1 billion
, a decrease of
$193 million
, or
6%
, compared with the prior year, due to lower net revenue and higher noninterest expense, partially offset by lower provision for credit losses.

Net revenue was
$12.0 billion
, a decrease of
$435 million
, or
3%
, compared with the prior year. Net interest income was
$7.1 billion
, down
$67 million
, or
1%
, driven by lower deposit margins and lower loan balances due to portfolio runoff, largely offset by higher deposit balances. Noninterest revenue was
$4.9 billion
, a decrease of
$368 million
, or
7%
, driven by lower mortgage fees and related income, partially offset by higher merchant servicing revenue, auto lease income and net interchange income.

The provision for credit losses was a benefit of
$19 million
, compared with a provision for credit losses of
$179 million
in the prior year. The current-quarter provision reflected a
$1.5 billion
reduction in the allowance for loan losses and total net charge-offs of
$1.5 billion
. The prior-year provision reflected a
$2.1 billion
reduction in the allowance for loan losses and total net charge-offs of
$2.3 billion
. For

more information, including net charge-off amounts and rates, see Consumer Credit Portfolio on pages
74–83
of this Form 10-Q.

Noninterest expense was
$6.9 billion
, an increase of
$27 million
from the prior year, driven by continued investments in the business, offset by lower mortgage servicing expense and lower remediation expense, inclusive of a current-quarter charge, related to an exited non-core product.

Year-to-date results

Consumer & Community Banking net income was
$5.7 billion
, a decrease of
$532 million
, or
9%
, compared with the prior year, due to lower net revenue, partially offset by lower provision for credit losses and noninterest expense.

Net revenue was
$23.6 billion
, a decrease of
$1.2 billion
, or
5%
, compared with the prior year. Net interest income was
$14.3 billion
, down
$224 million
, or
2%
, driven by lower deposit margins and lower loan balances due to portfolio runoff, largely offset by higher deposit balances. Noninterest revenue was
$9.3 billion
, a decrease of

The provision for credit losses was
$530 million
compared with
$821 million
in the prior year. The current-year provision reflected a
$2.7 billion
reduction in the allowance for loan losses and total net charge-offs of
$3.2 billion
. The prior-year provision reflected a
$3.9 billion
reduction in the allowance for loan losses and total net charge-offs of
$4.7 billion
. For more information, including net charge-off

amounts and rates, see Consumer Credit Portfolio on pages
74–83
of this Form 10-Q.

Noninterest expense was
$13.7 billion
, a decrease of
$228 million
, or
2%
, compared with the prior year driven by lower mortgage servicing expense and lower remediation expense, inclusive of a current-period charge, related to an exited non-core product, largely offset by continued investments in the business.